- Disappointing PMI data weigh on the greenback.
- Chicago Fed President Bullard opens the door for a rate cut.
- Coming up: Inflation and employment data from the euro area.
The EUR/USD pair rose to its highest level since May 13 at 1.1250 in the last hour as the greenback met a fresh selling wave following some dovish Fed commentary. As of writing, the pair was trading at 1.1245, up 0.65% on a daily basis.
The US Dollar Index, which lost its traction in the second half of the day after the IHS Markit’s and the ISM’s Manufacturing PMI figures for May came in below the market expectations, extended its decline in the last hour amid St. Louis Fed President James Bullard’s dovish remarks. Commenting on today’s PMI data, “The outlook in the manufacturing sector fell to its lowest point since October 2016 as the lengthening US trade dispute with China forces a reconsideration of global and national economic growth,” said FXStreet senior analyst Joseph Trevisani. “The purchasing manager’s index from the Institute for Supply Management dropped to 52.1 in May from April’s 52.8, missing its median expectation of 53.0.”
- US: Markit Manufacturing PMI comes in at 50.5 in May vs. 50.6 expected.
- US: ISM Manufacturing PMI falls to 52.1 in May from 52.8 in April.
Bullard argued a rate cut may be “warranted soon” amid the risks surrounding Trump administration’s trade policy and the low inflation. Following these comments, the CME Group FedWatch Tool’s odds of a Fed rate cut rose to 60% in July and 97% in December and the DXY slumped to its lowest level in three weeks at 97.20. At the moment, the index is down 0.35% on the day at 97.26.
Earlier today, the IHS Markit Manufacturing PMI for Germany and the euro area came in at 44.3 and 47.7, respectively, to match analysts’ estimates. Tomorrow, the Eurostat will be publishing the labour market and the inflation report for the euro area. Markets expect the core Consumer Price Index (CPI) to drop to 0.9% on a yearly basis in May from 1.3% in April.
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